THE MAN con OlSON Harvard Economic Studies Volume CXXIV The studies in this series are published by the Department of Economics of Harvard University. The Department does not assume responsibility for the views expressed. THE LOGIC OF COLLECTIVE ACTION Public Goods and the Theory of Groups MANCUR OLSON Harvard University Press Cambridge. Massachusetts London • England C Copyright 1965 and 1971 by the President and Fellows of Harvard College All rights reserved Twentieth printing, 2002 Library of Congress Catalog Card Number 65-19826 ISBN 0-674-53751-3 Printed in the United States of America FORALISON Preface, 1971 Since both the hardcover and paperback editions of this book are being reprinted at about the same time, this is a good occasion to consider making changes. It would be possible to amend the argument of the book, to add several ideas that have occurred to me since it was written, and to consider related work others have recently done. But I have decided against any such major revision. There has been no change in my views to justify rewriting the present text. Some of the ideas I would add to any new edition have already appeared in articles. It would take too long to deal adequately with what others have written. Accordingly, what I have done instead is to prepare a short Appendix. It provides any inter­ ested reader a guide to the articles I have done on the subject of this book and discusses an intriguing idea for further work that com­ mentators on the book have proposed. This Appendix begins on page 169. Though the memory of most favors fades in a short time, that has not been the case with my gratitude to the critics who helped me when the book was being written. I often have occasion to see that the reaction to the book would have been less generous (or more reserved) had early drafts not been criticized so well. The critic who was most helpful of all was Thomas Schelling of Harvard University. Though neither he nor my other critics are responsible for the faults of the book, much of whatever use it has had is due particularly to his criticisms. Edward C. Banfield and Otto Eekstein also criticized this study most helpfully when it was a draft of a PhD. thesis at Harvard. When the undertaking was in the pro­ spectus stage, I benefited greatly from the criticisms of Samuel Beer, John Kenneth Galbraith, Carl Kaysen, and Talcott Parsons. As I began to revise the thesis for publication, I received uncommonly helpful comments from Alan Holmans, Dale Jorgenson, John Kain, Douglas Keare, Richard Lester, and George von Furstenberg. Also, viii Preface at various stages in the process of making this book, William Baumol, David Bayley, Arthur Benavie, James Buchanan, Edward Claiborn, Aldrich Finegan, Louis Fourt, Gerald Garvey, Mohammed Guessous, W. E. Hamilton, Wolfram Hanrieder, Stanley Kelley, Roland McKean, Richard Musgrave, Robert Reichardt, Jerome Rothenberg, Craig Stubblebine, Gordon Tullock, Alan Williams, and Richard Zeckhauser made notable and constructive criticisms. Finally, I hope the dedication to my wife indicates how much I appreciate her help and encouragement. In addition to all of the other things she has done for me and for our three children, she helped with both the style and substance of this book. I am also thankful that Professor F. A. von Hayek took the ini­ tiative in arranging for the translation of this book into German and in contributing a foreword to the German translation. My work on this book was generously supported by the Social Science Research Council, the Shinner Foundation, and the Center for International Studies at Princeton University. I am also thankful to the Brookings Institution, whose hospitality greatly furthered my work on this and on a previous book. Mancur Olson Department of Economics University of Maryland College Park, Mary land CONTENTS Introduction 1 1. A Theory of Groups and Organizations 5 A. The purpose of organization 5 B. Public goods and large groups 9 C. The traditional theory of groups 16 D. Small groups 22 E. "Exclusive" and "inclusive" groups 36 F. A taxonomy of groups 43 H. Group Size and Group Behavior 53 A. The coherence and effectiveness of small groups 53 B. Problems of the traditional theories 57 C. Social incentives and rational behavior 60 IH. The Labor Union and Economic Freedom 66 A. Coercion in Iabor unions 66 B. Labor-union growth in theory and practice 76 C. The closed shop and economic freedom in the latent group 88 D. Government intervention and economic freedom in the latent group 91 IV. Orthodox Theories of State and Class 98 A. The economists' theory of the state 98 B. The Marxian theory of state and class 102 C. The logic of the Marxian theory 105 x Contents V. Orthodox Theories of Pressure Groups III A. The philosophical view of pressure groups 111 B. Institutional economics and the pressure group­ John R. Commons 114 C. Modern theories of pressure groups-Bentley, T ruman, Latham 117 D. The logic of group theory 125 VI. The "By-Product" and "Special Interest" Theories 132 A. The "by-product" theory of large pressure groups 132 B. Labor lobbies 135 C. Professional lobbies 137 D. The "special interest" theory and business lobbies 141 E. Government promotion of political pressure 148 F. Farm cooperatives and farm lobbies 153 G. Noneconomic lobbies 159 H. The "forgotten groups"-those who suffer in silence 165 Appendix 169 Index 179 THE LOGIC OF COLLECTIVE ACTION Introduction It is often taken for granted, at least where economic objectives are involved, that groups of individual$ with common interests usually attempt to further those common interests. Groups of individuals with common interests are expected to act on behalf of their common interests much as single individuals are often expected to act on behalf of their personal interests. This opinion about group behavior is frequently found not only in popular discussions but also in scholarly writings. Many economists of diverse methodological and ideological traditions have implicitly or explicitly accepted it. This view has, for example, been important in many theories of labor unions, in Marxian theories of class action, in concepts of "counter­ vailing power," and in various discussions of economic institutions. It has, in ad'dition, occupied a prominent place in political science, at least in the United States, where the study of pressure groups has been dominated by a celebrated "group theory" based on the idea that groups will act when necessary to further their common or group goals. Finally, it has played a significant role in many well­ known sociological studies. The view that groups act to serve their interests presumably is based upon the assumption that the individuals in groups act out of self-interest. If the individuals in a group altruistically disregarded their personal welfare, it would not be very likely that collectively they would seek some selfish common or group objective. Such altruism, is, however, considered exceptional, and self-interested be­ havior is usually thought to be the rule, at least when economic issues are at stake; no one is surprised when individual businessmen seek higher profits, when individual workers seek higher wages, or when individual consumers seek lower prices. The idea that groups tend to act in support of their group interests is supposed to follow logically from this widely accepted premise of rational, self-interested behavior. In other words, if the members of some group have a common interest or objective, and if they would all be better off if tnat objective were achieved, it has been thought to follow logically that the individuals in that group would, if they were rational and self-interested, act to achieve that objective. But it is not in fact true that the idea that groups will act in their 2 The Logic of Collective Action self-interest follows logically from the premise of rational and self­ interested behavior. It does not follow, because all of the individuals in a group would gain if they achieved their group objective, that they would act to achieve that objective, even if they were all rational and self-interested. Indeed, unless the number of individuals in a group is quite small, or unless there is coercion or some other special device to make individuals act in their common interest, rational, self-interested individuals will not act to achieve their common or group interests. In other words, even if all of the individuals in a large group are rational and self-interested, and would gain if, as a group, they acted to achieve their common interest or objective, they will still not voluntarily act to achieve that common or group interest. The notion that groups of individuals will act to achieve their com­ mon or group interests, far from being a logical implication of the assumption that the individuals in a group will rationally further their individual interests, is in fact inconsistent with that assumption. This inconsistency will be explained in the following chapter. If the members of a large group rationally seek to maximize their personal welfare, they will not act to advance their common or group objectives unless there is coercion to force them to do so, or unless some separate incentive, distinct from the achievement of the common or group interest, is offered to the members of the group individually on the condition that they help bear the costs or burdens involved in the achievement of the group objectives. Nor will such large groups form organizations to further their common goals in the absence of the coercion or the separate incentives just mentioned.